Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge. When he's not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.
Crypto asset manager Grayscale stated that the SEC had filed its first legal brief detailing its refusal to allow spot BTC ETFs.
Grayscale Investments said the Securities Exchange Commission (SEC) has filed its inaugural legal brief in the ongoing crypto lawsuit. The digital currency asset management firm is currently entangled in a legal battle with the SEC over the rejection of its spot Bitcoin ETF application.
In a statement issued on Friday, Grayscale said:
“This is the next milestone in our ongoing litigation following the filing of our opening brief on October 11th and the supporting amicus briefs shortly after.”
In an initial brief filed in October, Grayscale argued that the SEC practiced an uneven application of the law regarding Bitcoin futures ETFs. Although the regulator approved BTC futures tied to spot market pricing, it rejected Grayscale’s request to convert its GBTC fund into an ETF in June. Grayscale pointed out that this pattern suggests that the SEC approves Bitcoin futures-based ETFs while continuously denying spot BTC ETFs.
Furthermore, the New York-based crypto asset manager also stated that the SEC’s refusal cost its 850,000 investors. According to Grayscale, these investors already own shares in the previously mentioned trust. The company also argued that the SEC’s refusal to bring Bitcoin further into the regulatory perimeter runs afoul of its investor protection mandate.
Grayscale opines that the US investment community would benefit immensely from the protective regulated access to Bitcoin that spot ETFs would afford.
SEC Legal Brief Offers Counter-arguments to Grayscale Position
However, the SEC countered arguments posed by Grayscale in its 73-page legal brief. According to the Commission, its refusal to grant Grayscale’s request is “reasonable, reasonably explained, [and] supported by substantial evidence.” In addition, the regulatory agency also argued that there is “no inconsistency in the Commission’s disapproval of Grayscale’s spot ETP despite having approved two CME bitcoin futures ETPs.”
The Commission also pointed out that futures and spot-based Bitcoin funds fundamentally differ. Part of the securities regulator’s assessment of the Grayscale situation read:
“The bitcoin spot market, by contrast, is fragmented and unregulated, and petitioner presented no supportable basis to conclude that the CME’s surveillance of futures trading would sufficiently detect and deter fraud and manipulation targeting the bitcoin spot market and thereby protect against fraud and manipulation in Grayscale’s product.”
According to the SEC, its refusal to grant Grayscale’s ETF request does not reflect skepticism of BTC as an investment. However, amid accusing the Commission of creating an uneven playing field, Grayscale said it would review the SEC’s reply brief. In addition, the company also noted that its next brief is due January 13th, before the final briefs slated for the following month.
The price of Grayscale’s Bitcoin Trust, compared to the coin it holds, sank to a record low on Wednesday. According to data sources, the discount ratio was 47.3%, with the fund trading at a discount on the net asset value.
Shareholders of the trust do not have access to the underlying assets.
In other related news, Bitcoin was changing hands at just under $17K as of press time.